EFFECTIVE PROCUREMENT METHODS FOR SMALL GOVERNMENTS A presentation to the

1. EFFECTIVE PROCUREMENT METHODS FOR SMALL GOVERNMENTS A presentation to the Florida Government Finance Officers Association June 23, 2013 Presented by: Km! Ra Purchasing and Contracts Director City of Palm Beach Gardens

2. PURCHASING POLICY AND PROCEDURES • Have written purchasing/procurement policies and procedures, and distribute to the entire organization. • A good purchasing policy/manual includes: • a. Information on enabling authority. • b. Authorization levels, and who has contracting authority. • c. Clear, concise standard operating procedures. • d. Information on ethics and expected standards of conduct. • 3. Your purchasing policies and procedures manual should be a living document , which is accurately updated when best practices change.

3. FIRST STEPS • Identify need or requirement. (“I would like to buy something.”) • Make “Lease or Buy” decision. • Conduct market research! a. Commodity/Service Analysis: What are you buying? Do we want or need this? b. Demand Analysis: How often/how many used in the organization? c. Market Analysis: Availability of commodity and vendors? d. Supplier Analysis: Who are the best suppliers? Is this a sole source? e. Price Forecasting: Can we afford this?

4. PROCUREMENT METHODS • INFORMAL PURCHASES: a. Petty cash b. Purchase Order c. Purchase Card • FORMAL PURCHASES: a. Competitive quotations b. Competitive sealed solicitations (Invitation to Bid, Request for Proposals, Request for Letters of Interest, etc.) c. Sole source d. Bid waiver (single sourcing) e. Lease

5. INFORMAL PURCHASES INFORMAL PURCHASES: a. Petty cash b. Purchase Order c. Purchase Card

6. PETTY CASH • Small dollar purchases – usually not exceeding $50 • Old fashioned, but still a viable method for some entities. • Scheduled reconciliations with entity’s main cashier. • Unscheduled audits – usually performed by Finance Manager. • Establish written standard operating procedures and a simple petty cash form. • Separation of duties: person who controls the cash float may not issue to self.

7. PURCHASE ORDERS • Should be requisition driven. • Should not be used for term agreements/contracts – except as a document to encumber funds under a formal written agreement. • There is no need to print POs on special paper. • Should include standard and general terms about payment and delivery. • Have written standard operating procedures on the use of POs and the authorization limits. • A purchase order is a contract.

8. PURCHASE CARD PROGRAM • Generally for purchases that are of an “immediate delivery” nature. • Used for: subscriptions, memberships, online purchases, etc. • Set daily and monthly limits. • Have written standard operating procedures based on best practices. • Purchase Card Program may be administered by either Finance or Purchasing Department – but requires the involvement of both. • Periodic reviews of purchases and use.

9. FORMAL PURCHASES FORMAL PURCHASES: a. Competitive quotations b. Competitive sealed solicitations (Invitation to Bid, Request for Proposals, Request for Letters of Interest, etc.) c. Sole source d. Bid waiver (single sourcing) e. Leases EMERGENCY PURCHASES

10. COMPETITIVE QUOTATIONS • Low to medium dollar value. • Simple and easily understood specifications. • May be performed by the user department. • Rule of thumb: get at least three quotations. • You may use sites like: Demand Star, and Public Purchase; also call vendors who usually do business with your entity and can provide the good or service.

11. COMPETITIVE SEALED SOLICITATIONS • Invitation to Bid • Request for Proposals • Invitation to Negotiate • Request for Letters of Interest • Request for Qualifications Oh! Looks expensive! You must be serious!

12. WHEN TO USE EACH TYPE • INVITATION TO BID – you can describe the item or service clearly, and price is the most critical to the purchasing decision. • REQUEST FOR PROPOSALS– there are many ways to provide the good or service, and price is a minor consideration. • INVITATION TO NEGOTIATE – there are limited vendors, and they are publicly known. • REQUEST FOR LETTERS OF INTEREST – there are potentially multiple and various options and the entity is uncertain what is in its best interest. • REQUEST FOR QUALIFICATIONS– experience and qualifications are paramount, and price is unimportant.

13. SOLE SOURCE • Very few things are sole sources. • The determination of whether a good or service is a sole source is not made by the vendor. It is made by the public entity. • Very popular with IT because of the cost and effort to change. • Written justification must be supported by market research.

14. BID WAIVER/SINGLE SOURCE • Not to be confused with “Sole Source”. • Emergencies and when time is of the essence. • When it is “in the best interest” of the entity. • Strong written justification. • Must pass the “smell test”. • Not a recommended best practice. • May be based on a documented established standardization program.

15. LEASES • Conduct Lease or Buy analysis. Be honest about “needs” versus “wants”. • Understand the difference between a Capital Lease and an Operational Lease. • Termination can be difficult. • No automatic renewals.

16. EMERGENCIES The Dictionary Definitions: 1. A serious situation or occurrence that happens unexpectedly and demands immediate action. 2. Any event or situation that poses an immediate danger to life or property. 3. A “clear and present danger”. The Workplace Definitions: 1. A response is needed right now. 2. The boss says it’s an “emergency”.

17. MAIN SOLICITATION SECTIONS Invitation to Bid – Request for Proposals – Request for Letters of Interest • General Terms and Conditions • Special Terms and Conditions • Method of Award/Evaluation Criteria • Specifications/Statement of Work • Drawings/Attachments • Pricing • Signature Page • Affidavits and Other Required Forms

18. TERMS AND CONDITIONS Definition: Establishes the status of the relationship between two or more parties to an agreement. • GENERAL TERMS AND CONDITIONS – boilerplate; general to all or most of the entity’s solicitations. • SPECIAL TERMS AND CONDITIONS – specific to the immediate purchasing action.

19. SPECIFICATIONS Describes what you want to purchase. A specification is a physical description of a GOOD OR COMMODITY. What does the item look like? How long? How wide?

20. TYPES OF SPECIFICATIONS • Design specifications. • Performance specifications. • Qualified Products List. • Brand name or approved equal. • Samples. • Engineering drawings. • Combination of two or more of the above.

21. STATEMENT OF WORK Describes what you want to purchase. A Statement of Work is a description of the SERVICE to be provided. What service do you want the vendor to perform? What kind of results are you expecting?

22. QUALITIES OF A GOOD SPECIFICATION OR STATEMENT OF WORK • Identifies the minimum requirements. • Open and fair: allows competition. • Simple, clear, concise, and easy to understand by the target vendors. • Identifies physical, quality, and performance requirements. • Corresponds and relates to the Method of Award or Evaluation Criteria. • Results in an equitable award to lowest bidder or best value.

23. EVALUATION • Must be based on specifications or statement of work in solicitation. • Must correspond with the Method of Award or the Evaluation Criteria. • Must be fair and open. • Clarification should be performed, when applicable. • What is a responsive vendor? • What is a responsible vendor?

24. AWARD OF CONTRACT • Must be fair and equitable. • To the lowest bidder or the proposer offering the best value. • Allow for protests.

25. CONTRACT MANAGEMENT • DOCUMENTATION/CONTRACT FILE copies of contract, correspondence, tally/scoring sheet, etc. 2. CONTRACT ADMINISTRATION renewal, price adjustment, termination, amendments, etc. 3. VENDOR PERFORMANCE AND MANAGEMENT performance issues, invoicing, communication, etc.

26. INSPECTOR GENERAL The Office of Inspector General is not your enemy. The OIG serves a valid and important public function. However, there are certain important things to remember to protect your organization from a bad audit and any subsequent negative publicity: a. Benchmark your policies and procedures to best practices. b. Follow your policies and procedures. c. Be honest and correct mistakes when they occur, then take steps to prevent recurrence. d. Ask for help or advice from OIG and peers. e. Don’t cultivate a contentious relationship with the OIG. f. Document! Document! Document!

27. QUESTIONS & COMMENTS EMAIL: KMRA@PBGFL.COM